$100 Million Hollywood Tax Credit Awaits Vote

Even as Washington passed a stimulus package with no help for Hollywood, Sacramento this weekend considered a package of $100 million in tax credits aimed at keeping movie and tv production in the state.

As of Sunday evening, Gov. Schwarzenegger and Democratic leaders had not lined up Republican votes to get the budget deal finished, leaving the production tax credit — and everything else — in doubt.

The initiative backed by the governor has so far survived attempts to kill it in intensive budget negotiations going on in the capital. It will be part of the final deal to close a $42 billion budget gap when state lawmakers vote this weekend in Sacramento.

The so called Ugly Betty Production Credit – named for the ABC show that relocated to New York City last year – would fund the program at $100 million a year for five years, providing a new incentive for California-based studios to shoot their projects in the state.

California has lost millions of dollars of commerce with an exodus of films and productions to Canada, New York, New Mexico and other states that offer aggressive tax incentives to help producers.

A study by Film LA, which tracks location shoots in Los Angeles, found that production outside of locally-based studios fell 14 percent last year, to 7,043 days, the lowest level since annual counting began in 1993.

Meanwhile tax credits of 30 percent from New York State and an additional 5 percent from New York City helped create nearly 20,000 jobs in New York State, according to a study by Ernst &Young for the state Economic Development Office and the Motion Picture Association of America. (Though New York just recently ran out of money for its program.)

The study found the new incentives helped create or retain 7,000 film industry jobs, spurring an additional 12,500 from related economic activity.

The California measure originally sought $200 million a year in funding and during negotiations on Thursday night was pared back to a $100 million program without spending cuts to offset it, effectively killing it.

But with strong backing from the governor and from Karen Bass, the Democratic speaker of the Assembly whose district includes Culver City, the former production home of “Ugly Betty.” the measure regained life late Friday.

Assembly Speaker Karen Bass, a Democrat, is among the strongest supporters of the measure: Her district includes Culver City, home of “Ugly Betty” before she left for New York.

Bass’s office did not return multiple phone calls seeking further information about the initiative.

Kathleen Milnes, president and CEO of the Entertainment Economy Institute, a research group that focuses on workforce issues, said she is "not a fan of incentives” for the industry.

"It would probably help for a while, but it’s a rush to the bottom," she said. "And I’m rather surprised this is happening now with a deficit of $42 billion.”

Like all pieces of the budget deal, the production tax credit is now subject to final vote by both houses of the legislature in Sacramento, where most Republicans have opposed the bill for its lack of more tax cuts.